Elevance Health raises 2026 profit outlook as revenue reaches US$50.4B
The benefit expense ratio improved to 90.6 per cent, but non-operating gains helped lift earnings and the annual forecast.
Adrian Kessler
Quarterly operating revenue rose 0.7 per cent to US$50.4 billion as Elevance Health, Inc. NYSEELV raised its full-year earnings outlook on Wednesday. Adjusted earnings reached US$6.99 a share, compared with US$6.03 a year earlier.
Shares NYSEELV fell 1.8 per cent to US$432.27 on the New York Stock Exchange at 10:15 a.m. EDT on Wednesday. The decline came despite the higher annual forecast.
Elevance is a large Indianapolis-based health insurer and healthcare services provider serving consumers across the United States through its insurance, pharmacy and care businesses.
Management now expects adjusted earnings of at least US$29.00 a share for 2026, up from at least US$27.00 in its July 15 outlook. The quarterly result included a net non-operating benefit of US$1.85 a share.
Medical Costs Improve While Margins Stay Flat
The Oct. 21 supplemental presentation put the benefit expense ratio at 90.6 per cent, down from 91.3 per cent a year earlier. That ratio measures benefit expenses against premium revenue, showing how much premium income goes toward members' care.
Elevance attributed the improvement to better Medicare Advantage and individual Affordable Care Act performance. It said operating performance added about US$0.50 a share above its own third-quarter outlook, separately from the non-operating benefit.
The adjusted operating expense ratio rose to 11.3 per cent in the September quarter from 10.4 per cent a year earlier. Elevance attributed the increase principally to targeted investments in capabilities intended to support longer-term performance.
Those expenses accompanied an adjusted operating margin of 2.7 per cent, unchanged from the prior-year quarter. Adjusted operating gain declined 0.5 per cent, with both periods rounding to US$1.3 billion.
Health Benefits' operating margin narrowed to 1.0 per cent in the September quarter from 1.4 per cent a year earlier, reflecting targeted investments partly offset by lower benefit expenses. Medical membership stood at approximately 44.9 million on Sept. 30, down by 487,000 over the year.
Carelon provided another source of profit as its specialty pharmacy and care services businesses expanded. Its third-quarter operating gain rose 17 per cent to US$0.9 billion, which Elevance attributed to risk-based care services and improved specialty pharmacy profitability.
UnitedHealth Group NYSEUNH also reported a lower medical care ratio in its Oct. 13 results, at 88.4 per cent. Its ratio was 89.9 per cent a year earlier, although the latest quarter also benefited from US$610 million of favourable medical reserve development.
The broader State Street Health Care Select Sector SPDR ETF NYSEARCAXLV fell 0.77 per cent to US$178.43 at 10:17 a.m. EDT on Wednesday, according to Google Finance.
The Growth Baseline Excludes One-Time Items
Elevance's 2027 growth target uses a different starting point from its headline annual guidance. The company raised that earnings baseline to at least US$26.75 from at least US$26.00, excluding non-recurring investment income, other non-operating items and targeted one-time investments.
"We are raising our 2026 earnings outlook and remain confident in delivering at least 12 per cent growth in adjusted diluted earnings per share in 2027 from our higher earnings baseline of at least $26.75," Elevance chief executive Gail K. Boudreaux said in the release.
Operating cash flow guidance for 2026 rose to at least US$6.5 billion. Parent-company cash and investments totalled approximately US$2.4 billion on Sept. 30.
The next disclosed shareholder deadline is Dec. 4, the record date determining eligibility for the US$1.72 quarterly dividend. Payment is scheduled for Dec. 18.
